Contract Breach Claim Clouds CK Hutchisons’ Panama Port Sale
By Wang Xiaoqing and Kelly Wang
Hong Kong-based conglomerate CK Hutchison Holdings Ltd. is facing fresh scrutiny over its Panama port operations, following allegations from auditors in the Central America country that a subsidiary company had violated the terms of its concession contract.
According to the audit released on April 7, Panama authorities claim that Panama Ports Company (PPC) — a CK Hutchison subsidiary that has operated two ports in the country since 1998 —failed to meet financial obligations to the state and violated regulatory procedures when securing a contract extension in 2021.
PPC has denied all allegations of financial and compliance misconduct. The renewed scrutiny came after U.S. President Donald Trump accused China of exerting influence over the Panama Canal — an assertion Panamanian officials have denied.
In an April 9 statement, PPC said it has invested 1.695 billion balboas ($1.695 billion) in Panama’s port infrastructure, far exceeding its original obligation of 50 million balboas. “To maintain … that PPC has failed to pay approximately 1,200 million balboas to the Panamanian State, is absolutely contrary to reality,” the company said.
However, Panama’s Comptroller General Anel Flores said at a press conference earlier this week that PPC used tax exemptions to save 850 million balboas in payments it owed to the state in its initial 25-year concession term. He added that the company still owes an additional 300 million balboas. Flores also alleged that PPC failed to share 10% of its profits with the Panamanian government, as stipulated in the agreement.
In response, PPC said it had paid the Panamanian state 126 million balboas in dividends over the past 28 years.
Regarding the contract renewal allegations, the PPC statement said its 25-year renewal remains valid and legally compliant. The company cited a 2020 audit by Panama’s Comptroller General which validated the firm’s financial contributions and compliance. It also noted the Panama Maritime Authority reaffirmed in 2021 that PPC had met all contractual obligations.
PPC, a subsidiary of CK Hutchison, which was established in 2015 by Hong Kong billionaire Li Ka-shing, owns 90% of two ports in Panama — namely Cristobal Port at the Atlantic entrance of the Panama Canal, and Balboa Port on the Pacific side. The original concession was signed in 1997 and renewed for another 25 years in 2021.
In March, CK Hutchison announced plans to sell its 43 port operations across 23 countries — including those in Panama — to a consortium led by U.S. asset manager BlackRock in a blockbuster deal worth more than $19 billion. The move followed mounting political pressure from Trump, who has threatened to “take back” the Panama Canal. The financial and compliance audit from Panama’s Office of the Comptroller General began in January.
CK Hutchison has insisted that the sale is purely commercial and has no connection to recent political discussions about the Panama ports. Hong Kong Special Administrative Region’s Chief Executive John Lee said in March that his government “opposes the abusive use of coercion, of bullying tactics, in international and economic and trade relations.”
As of now, CK Hutchison has not disclosed any updates on the sale of its international port assets. According to a March 4 announcement, the exclusive negotiation period with the BlackRock-TiL consortium will last 145 days, ending on July 27.
Contact reporter Kelly Wang (jingzhewang@caixin.com)
caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.
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